DBRS Confirms Ratings of Institutional Mortgage Securities Canada Inc., Series 2015-6

DBRS Limited (DBRS) confirmed the ratings on the Commercial Mortgage Pass-Through Certificates, Series 2015-6 issued by Institutional Mortgage Securities Canada Inc., Series 2015-6 as follows:

-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class B at AA (sf)
-- Class C at A (sf)
-- Class X at A (sf)
-- Class D at BBB (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (sf)
-- Class G at B (sf)

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction since issuance. At issuance, the collateral consisted of 47 fixed-rate loans secured by 64 commercial properties, with a trust balance of approximately $325.4 million. As of the December 2018 remittance, 46 of the original 47 loans remained in the pool, with a current trust balance of $287.3 million, representing a collateral reduction of 11.7% due to loan repayment and scheduled amortization. To date, approximately 93.6% of the pool has reported YE2017 financials, and based on the most recent year-end reporting, the pool reported a weighted-average (WA) debt service coverage ratio (DSCR) and debt yield of 1.48 times (x) and 10.8%, respectively, compared with the DBRS Term DSCR and DBRS Debt Yield figures 1.32x and 8.6%, respectively, at issuance. Based on the same reporting, the top 15 loans (70.7% of the pool) reported a WA DSCR and debt yield of 1.59x and 12.3%, respectively, compared with the WA DBRS Term DSCR of 1.42x, reflecting a 12.5% net cash flow growth over the DBRS issuance figures.

As of the December 2018 remittance, there were two loans (9.0% of the pool) on the servicer’s watchlist, including Sterling Tower (Prospectus ID#5, 5.3% of the pool), which was originally flagged for a low DSCR due to an increase in operating expenses. However, as of the May 2017 trailing 12-month (T-12) reporting, performance has stabilized with a DSCR of 1.45x. DBRS has reached out to the servicer regarding the loan’s status on the watchlist; a response is pending as of the date of this press release. The other loan on the watchlist, Comfort Inn & Suites Airdrie (Prospectus ID#9, 3.7% of the pool balance), was flagged for a low DSCR and occupancy, driven by declines in the oil and gas market sector. The collateral is secured by a 103-key, limited-service hotel located in Airdrie, Alberta, 30 kilometres north of Calgary. As of the YE2017 financials, the loan reported an amortizing DSCR of 0.67x compared with the DBRS Term DSCR of 1.21x. The borrower has been supplementing the monthly debt service payment since early 2016, and as of June 2018, a loan amendment was completed, granting a 24-month interest-only (IO) period. As of the February 2018 STR report, the property had T-12 occupancy, average daily rate and RevPAR metrics of 53.2%, $104.6 and $55.6, respectively, compared with the issuance figures of 80.9%, $127.4 and $103.1, respectively. DBRS assumed a stressed cash flow scenario for the loan as part of this review, given the downwards trend in performance and soft market. For further information, please see the DBRS loan commentary on the DBRS Viewpoint platform, for which information has been provided below.

At issuance, DBRS assigned investment-grade shadow ratings to the South Hill Shopping Center (6.6% of the pool balance), Markham Town Square (4.3% of the pool balance) and U-Haul SAC3 Portfolio (5.8% of the pool balance) loans. With this review, DBRS confirms that the performance of these loans remains consistent with investment-grade loan characteristics.

Class X is an IO certificate that references a single rated tranche or multiple rated tranches. The IO rating mirrors the lowest-rated applicable reference obligation tranche adjusted upward by one notch if senior in the waterfall.

All ratings are subject to surveillance, which could result in ratings being upgraded, downgraded, placed under review, confirmed or discontinued by DBRS.

DBRS provides updated analysis and in-depth commentary in the DBRS Viewpoint platform for the following loans in the transaction:
-- Prospectus ID#2 – South Hill Shopping Center (6.6% of the pool balance)
-- Prospectus ID#8 – Markham Town Square (4.3% of the pool balance)
-- Prospectus ID#9 – Comfort Inn & Suites Airdrie (3.7% of the pool balance)
-- Prospectus ID#33 – U-Haul SAC3 Portfolio (5.8% of the pool balance)

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrs.com. The platform includes issuer and servicer data for most outstanding CMBS transactions (including non-DBRS rated), as well as loan level and transaction level commentary for most DBRS rated and monitored transactions.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The principal methodology is North American CMBS Surveillance Methodology, which can be found on dbrs.com under Methodologies & Criteria. For a list of the Structured Finance related methodologies that may be used during the rating process, please see the DBRS Global Structured Finance Related Methodologies document on www.dbrs.com. Please note that not every related methodology listed under a principal Structured Finance asset class methodology may be used to rate or monitor an individual structured finance or debt obligation.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at info@dbrs.com.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.

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